Global rating agency Moody’s has downgraded rating of Indian Overseas Bank’s (IOB) local and foreign currency deposits from “Baa3” to “Ba1” following the government’s policy to differentiate between public sectors banks (PSBs) when distributing capital. The government has indicated that efficient banks will receive capital from its majority owner (government of India). PSBs have to reorient policies to rejig businesses and compete for equity capital. The rating agency has also downgraded IOB’s senior unsecured debt, issued from its Hong Kong branch to Ba1 from Baa3.
The rating action reflects Moody’s assumption of a lower level of support from the Government of India following its recent decision indicating policy to differentiate between public sector banks (PSBs) when distributing capital.
